At an investor event in Herzogenaurach, the Adidas Group detailed robust growth plans for three of its key categories for the Adidas Brand – football (soccer), running and Originals over the next five years.
While Adidas Football and Adidas Originals aim to lead in every market by 2020, Adidas Running is targeting significant market share gains in the coming years.
In football, Adidas intends to expand its football business at a mid-single-digit rate between 2015 and 2020 on average per year on a currency-neutral basis, outgrowing the market and building on its leading position worldwide in the category. The brand will particularly invest in the footwear side of the football category rather than apparel. The shift was marked by Adidas’ move last month to ditching four models including F50, Predator, Nitrocharge and 11pro while introducing the X and Ace models to join the Messi boot line-up.
To connect with soccer players, football destinations will be established in key cities, including different kinds of pitches, shoot-out areas, lounges and bars, with premium presentation at the point of sale. Engagement will also be driven by setting up permanent, seasonal or event-driven grassroots programs. Finally, the establishment of an influencer network is expected to allow closer interaction with the consumer, who will be an integral part of the product and content creation going forward.
“Soccer still starts on the street. This is where the kids get in touch with the sport,” Markus Baumann, general manager, Adidas football, told analysts, noting that 226 million unregistered soccer players worldwide dwarfed the 30 million registered.
In the professional game, Adidas will focus on the top three soccer leagues in the world – England, Germany and Spain – as well as the top 25 clubs. Adidas last year struck a record shirt deal with Manchester United, replacing Nike. It will also replace Nike at Italian champions Juventus this summer and has extended an outfitting deal with Bundesliga champions Bayern Munich.
Despite the corruption scandal, Adidas officials said the company has no intention of changing its contracts with FIFA and Europe's soccer authority UEFA in the next couple of years with both still on long-term contracts. However, Baumann said that when contracts come up for renegotiation, Adidas would explore how influential such partnerships are to reaching its target consumer.
Adidas saw the 2014 World Cup boost soccer sales by more than 20 percent last year to €2.1 billion ($2.35 billion)
In running, currency-neutral sales are expected to double by 2020. A particular focus will be on the North American market where “significant market share gains” over the next five years are being targeted. A major driver fueling North American running growth will be the establishment of two creation hubs for the category in the market. Mirroring its approach in soccer, RunBases, which are hybrid stores and community centers, will be established in both Los Angeles and New York City in addition to the one opened earlier this year in Boston.
Adidas said it plans to design more running shoes specifically for the U.S. market, helped by the recent establishment of a new footwear design studio in Brooklyn staffed by three former Nike designers.
“We will focus our activities on key running cities representing the largest running communities globally,” said Adrian Leek, general manager, Adidas Running. “We will also continue to open source our running business with partners such as BASF, key athletes and running communities around the globe to ensure we continue to create consumer-focused product. Additionally, we have an exciting consumer proposition in the pipeline looking into speeding up and redefining the manufacturing of footwear.”
Adidas Brand’s running shoes grew 15 percent in 2014 to €1.5 billion ($1.68 bn) in 2014, boosted by a strong response to its Boost midsole technology platform. It expects to sell 15 million pairs of Boost shoes this year.
The Originals category is expected to expand by 50 percent from 2015 to 2020. The sub-brand will drive its business by focusing on a thorough lifecycle management of a limited number of global footwear franchises including the Stan Smith, Superstar, ZX FLUX and Tubular. By 2018, the major product families are expected to generate the majority of the overall Adidas Originals footwear revenues, “allowing Adidas to be more impactful and efficient at the same time.”
Adidas Originals will also significantly expand its business with key sneaker accounts as well as its own direct-to-consumer channel with new flagship expected to open in more than 30 cities around the globe. Increased speed to market is expected to allow in-season creation and fast replenishment of strong-selling items for Originals while enabling the brand to capture current market trends better.
“The hype we have recently created around our iconic Stan Smith and Superstar silhouettes is just the beginning,” said Arthur Hoeld, general manager, Adidas Originals. “With our well-filled product pipeline as well as some of the world’s most influential artists such as Kanye West, Pharrell Williams and Rita Ora collaborating with us, telling our stories and promoting our products, we will be closer to our sports lifestyle consumers than ever before and set for strong growth in the years to come.”
Originals growth has catapulted from $900 million in 2004 to $1.4 billion in 2008 and $2.6 billion ($4.4 bn) in 2014.
As reported under a five-year plan revealed earlier this year, The Adidas Group expects to spur top- and bottom-line growth over the next five years, with revenues projected to increase at a high-single-digit rate on average per year on a currency-neutral basis until 2020 compared to the expected 2015 results. The Group’s net income is expected to grow at a considerably higher rate than the top line and is projected to expand by around 15 percent on average in each of the next five years.
